Third Quarter 2017 Financial Highlights (results compared to the same
year-ago quarter)

Revenue increased 8% to a record $16.6 million

Annual contract value increased 10% to a record $66.1 million

New first year orders increased 11% to $2.1 million

GAAP net income increased 8% to $1.9 million

GAAP fully diluted earnings per share increased 5% to $0.03

Non-GAAP fully diluted earnings per share increased 5% to $0.07

Adjusted EBITDA increased 7% to $4.6 million

Cash flow from operations increased to a company record $6.7 million

The company ended the quarter with $32.8 million in cash and no debt

Management Commentary

“Following successful launches in the prior quarter, ZixProtect and
ZixArchive continued to perform well ahead of our internal plan,” said Dave
Wagner, Zix’s Chief Executive Officer. “Our early traction with
these solutions has validated the timely rollout of our bundled product
suite, when many customers are increasingly seeking more value from
fewer vendors. During the quarter, several partner-based accounts fell
behind their deployment schedules, and therefore their contributions
could not be included in our third quarter revenue results. We also
experienced weakness in our customer renewals which was largely driven
by customer M&A activity. Our strategic decision to enter into the
advanced threat protection and email archiving markets while also
strengthening our hosted solution better positions us to mitigate these
pressures and drive greater long-term value for our customers.”

Zix’s Chief Financial Officer Dave
Rockvam added: “New first year orders during the third quarter
increased 11.4% and experienced a solid boost due to the recent
introductions of ZixProtect and ZixArchive. We also experienced solid
year-over-year revenue growth and achieved record revenue for the 14th
quarter in a row. Additionally, we achieved our non-GAAP fully diluted
earnings per share guidance of $0.07. Complementing these healthy
results was our return to achieving a 28% adjusted EBITDA margin, which
we forecasted in the prior quarter and which is consistent with our
long-term model. Looking ahead, we expect similar strong bottom-line
results but expect a slight impact to our previously forecasted topline.”

Wagner continued: “We are driven by innovation and our commitment to our
customers to provide the very best email security solution possible,
which is why we acquired Entelligence Messaging Server (EMS) during the
third quarter. The EMS technology will be integrated into our ZixEncrypt
roadmap to enhance our end-to-end encryption capabilities, as well as
give us more delivery and deployment options and FIPS validated
cryptography, which will give us an added edge when marketing to new
customers and upselling existing ones. When combined with the portfolio
expansion from our Greenview Data acquisition earlier in the year, we
believe our enhanced product suite positions us as not only the gold
standard in email encryption but in the broader email security market as
well.”

(3) A reconciliation of GAAP to non-GAAP adjusted results is
included in this press release and available on our investor relations
Web page at http://investor.zixcorp.com

(4) Service contract commitments that represent future
revenue to be recognized as the services are provided

Financial Outlook

For the fourth quarter 2017, the company forecasts revenue to range
between $16.6 million and $16.8 million, representing an increase of 7%
to 8% year-over-year. The company forecasts fully diluted GAAP earnings
per share to be in a range of $0.02 and $0.03 and fully diluted non-GAAP
adjusted earnings per share to be $0.08 for the fourth quarter 2017.

For fiscal year 2017, the company is revising its revenue guidance range
to between $65.5 million to $65.7 million, representing an increase of
9% compared to fiscal year 2016. The company forecasts fully diluted
GAAP earnings per share to be between $0.10 and $0.12 and reiterates its
fully diluted non-GAAP adjusted earnings per share guidance of $0.28 for
fiscal year 2017.

A live webcast of the conference call will be available in the investor
section of Zix’s website here.
Alternatively, participants can access the conference call by dialing
1-855-853-6940 (U.S. toll-free) or 1-720-634-2906 (international) at
least 15 minutes before the call and entering access code 93297452. If
you have any difficulty connecting with the conference call, please
contact Liolios Group at 1-949-574-3860.

An audio replay of the conference will be available for seven days, by
dialing 1-855-859-2056 (U.S. toll-free) or 1-404-537-3406
(international) and entering the access code 93297452. An archive of the
webcast will also be available on the Zix investor relations Web site.

About Zix Corporation

Zix Corporation (Zix) is a leader in email security. Trusted by the
nation’s most influential institutions in healthcare, finance and
government, Zix delivers a superior experience and easy-to-use solutions
for email encryption and data loss prevention, advanced threat
protection, archiving and bring your own device (BYOD) mobile security.
Focusing on the protection of business communication, Zix enables its
customers to better secure data and meet compliance needs. Zix is
publicly traded on the Nasdaq Global Market under the symbol ZIXI. For
more information, visit www.zixcorp.com.

Statements in this release that are not purely historical facts or that
necessarily depend upon future events, including statements about
forecasts of sales, revenue or earnings, potential benefits of strategic
relationships, or other statements about anticipations, beliefs,
expectations, hopes, intentions or strategies for the future, may be
forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended. Readers are cautioned not
to place undue reliance on forward-looking statements. All
forward-looking statements are based upon information available to Zix
on the date this release was issued. Zix undertakes no obligation to
publicly update or revise any forward-looking statements, whether as a
result of new information, future events or otherwise. Any
forward-looking statements involve risks and uncertainties that could
cause actual events or results to differ materially from the events or
results described in the forward-looking statements, including risks or
uncertainties related to market acceptance of new Zix solutions and how
privacy and data security laws may affect demand for Zix email data
protection solutions. Zix may not succeed in addressing these and other
risks. Further information regarding factors that could affect Zix
financial and other results can be found in the risk factors section of
Zix’s most recent filing on Form 10-K with the Securities and Exchange
Commission.

ZIX CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

2017

December 31,

(unaudited)

2016

ASSETS

Current assets:

Cash and cash equivalents

$

32,760,000

$

26,457,000

Receivables, net

1,235,000

1,209,000

Prepaid and other current assets

3,039,000

2,829,000

Total current assets

37,034,000

30,495,000

Property and equipment, net

4,175,000

3,976,000

Intangible Assets, Net

4,828,000

-

Goodwill

8,420,000

2,161,000

Deferred tax assets

40,901,000

45,726,000

Total assets

$

95,358,000

$

82,358,000

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities:

Accounts payable and accrued expenses

$

5,443,000

$

4,720,000

Deferred revenue

28,543,000

25,773,000

Total current liabilities

33,986,000

30,493,000

Long-term liabilities:

Deferred revenue

1,912,000

1,448,000

Deferred rent

1,230,000

1,347,000

Total long-term liabilities

3,142,000

2,795,000

Total liabilities

37,128,000

33,288,000

Total stockholders’ equity

58,230,000

49,070,000

Total liabilities and stockholders’ equity

$

95,358,000

$

82,358,000

ZIX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Revenue

$

16,592,000

$

15,308,000

$

48,863,000

$

44,566,000

Cost of revenue

3,272,000

2,652,000

9,342,000

7,824,000

Gross profit

13,320,000

12,656,000

39,521,000

36,742,000

Operating expenses:

Research and development

2,916,000

2,619,000

8,047,000

7,118,000

Selling, general and administrative

7,514,000

7,484,000

23,282,000

23,656,000

Total operating expenses

10,430,000

10,103,000

31,329,000

30,774,000

Operating income

2,890,000

2,553,000

8,192,000

5,968,000

Operating margin

17

%

17

%

17

%

13

%

Other income, net

86,000

74,000

230,000

183,000

Income before income taxes

2,976,000

2,627,000

8,422,000

6,151,000

Income tax expense

(1,070,000

)

(858,000

)

(3,603,000

)

(2,252,000

)

Net income

$

1,906,000

$

1,769,000

$

4,819,000

$

3,899,000

Basic income per common share:

$

0.04

$

0.03

$

0.09

$

0.07

Diluted income per common share:

$

0.03

$

0.03

$

0.09

$

0.07

Shares used in per share calculation - basic

53,786,876

52,714,544

53,443,749

54,157,050

Shares used in per share calculation - diluted

54,631,407

53,262,075

54,263,258

54,699,207

ZIX CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

Nine Months Ended September 30,

2017

2016

Operating activities:

Net income

$

4,819,000

$

3,899,000

Non-cash items in net income

7,262,000

5,053,000

Changes in operating assets and liabilities

1,903,000

4,272,000

Net cash provided by operating activities

13,984,000

13,224,000

Investing activities:

Purchases of property and equipment

(1,754,000

)

(1,772,000

)

Acquisition of business, net of cash acquired

(8,245,000

)

-

Net cash used in investing activities

(9,999,000

)

(1,772,000

)

Financing activities:

Proceeds from exercise of stock options

4,198,000

155,000

Purchase of Treasury Stock

(1,880,000

)

(15,499,000

)

Net cash provided by (used in) financing activities

2,318,000

(15,344,000

)

Increase (Decrease) in cash and cash equivalents

6,303,000

(3,892,000

)

Cash and cash equivalents, beginning of period

26,457,000

28,664,000

Cash and cash equivalents, end of period

$

32,760,000

$

24,772,000

ZIX CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Unaudited)

Three Months Ended

Nine Months Ended

September 30,

September 30,

2017

2016

2017

2016

Revenue:

GAAP revenue

$

16,592,000

$

15,308,000

$

48,863,000

$

44,566,000

Cost of revenue

GAAP cost of revenue

$

3,272,000

$

2,652,000

$

9,342,000

$

7,824,000

Stock-based compensation charges (1)

(A)

(78,000

)

(55,000

)

(226,000

)

(171,000

)

Strategic consulting and litigation costs (2)

(B)

(1,000

)

-

(3,000

)

-

Intangible Amortization (3)

(C)

(50,000

)

-

(100,000

)

-

Non-GAAP adjusted cost of revenue

$

3,143,000

$

2,597,000

$

9,013,000

$

7,653,000

Gross profit:

GAAP gross profit

$

13,320,000

$

12,656,000

$

39,521,000

$

36,742,000

Stock-based compensation charges (1)

(A)

78,000

55,000

226,000

171,000

Strategic consulting and litigation costs (2)

(B)

1,000

-

3,000

-

Intangible Amortization (3)

(C)

50,000

-

100,000

-

Non-GAAP adjusted gross profit

$

13,449,000

$

12,711,000

$

39,850,000

$

36,913,000

Research and development expense

GAAP research and development expense

$

2,916,000

$

2,619,000

$

8,047,000

$

7,118,000

Stock-based compensation charges (1)

(A)

(98,000

)

(63,000

)

(276,000

)

(215,000

)

Strategic consulting and litigation costs (2)

(B)

(52,000

)

-

(55,000

)

-

Non-GAAP adjusted research and development expense

$

2,766,000

$

2,556,000

$

7,716,000

$

6,903,000

Selling and marketing expense

GAAP selling and marketing expense

$

4,852,000

$

4,705,000

$

15,247,000

$

14,197,000

Stock-based compensation charges (1)

(A)

(234,000

)

(156,000

)

(670,000

)

(460,000

)

Strategic consulting and litigation costs (2)

(B)

(1,000

)

-

(2,000

)

-

Intangible Amortization (3)

(C)

(57,000

)

-

(113,000

)

-

Non-GAAP adjusted selling and marketing expense

$

4,560,000

$

4,549,000

$

14,462,000

$

13,737,000

General and administrative expense

GAAP general and administrative expense

$

2,662,000

$

2,779,000

$

8,035,000

$

9,459,000

Stock-based compensation charges (1)

(A)

(334,000

)

(177,000

)

(851,000

)

(687,000

)

Strategic consulting and litigation costs (2)

(B)

(90,000

)

(664,000

)

(760,000

)

(2,636,000

)

Corporate separation payment (4)

(D)

-

-

(3,000

)

(358,000

)

Non-GAAP adjusted general and administrative expense

$

2,238,000

$

1,938,000

$

6,421,000

$

5,778,000

Operating income:

GAAP operating income

$

2,890,000

$

2,553,000

$

8,192,000

$

5,968,000

Stock-based compensation charges (1)

(A)

744,000

451,000

2,023,000

1,533,000

Strategic consulting and litigation costs (2)

(B)

144,000

664,000

820,000

2,636,000

Intangible Amortization (3)

(C)

107,000

-

213,000

-

Corporate separation payment (4)

(D)

-

-

3,000

358,000

Non-GAAP adjusted operating income

$

3,885,000

$

3,668,000

$

11,251,000

$

10,495,000

Adjusted Operating Margin

23.4

%

24.0

%

23.0

%

23.5

%

Net income:

GAAP net income

$

1,906,000

$

1,769,000

$

4,819,000

$

3,899,000

Stock-based compensation charges (1)

(A)

744,000

451,000

2,023,000

1,533,000

Strategic consulting and litigation costs (2)

(B)

144,000

664,000

820,000

2,636,000

Intangible Amortization (3)

(C)

107,000

-

213,000

-

Corporate separation payment (4)

(D)

-

-

3,000

358,000

Income tax impact

(E)

983,000

713,000

3,215,000

1,859,000

Non-GAAP adjusted net income

$

3,884,000

$

3,597,000

$

11,093,000

$

10,285,000

Diluted net income per common share:

GAAP net income per share

$

0.03

$

0.03

$

0.09

$

0.07

Adjustments per share

(A-E)

$

0.04

$

0.04

$

0.11

$

0.12

Non-GAAP adjusted net income per share

$

0.07

$

0.07

$

0.20

$

0.19

Shares used to compute Non-GAAP adjusted net income per share -
diluted

54,631,407

53,262,075

54,263,258

54,699,207

Reconciliation of Net income to EBITDA and Adjusted EBITDA:

(F)

Net income

$

1,906,000

$

1,769,000

$

4,819,000

$

3,899,000

Income tax provision

1,070,000

858,000

3,603,000

2,252,000

Depreciation

621,000

562,000

1,811,000

1,660,000

Intangible Amortization (3)

107,000

-

213,000

-

EBITDA

3,704,000

3,189,000

10,446,000

7,811,000

Adjustments:

Stock-based compensation charges (1)

(A)

744,000

451,000

2,023,000

1,533,000

Strategic consulting and litigation costs (2)

(B)

144,000

664,000

820,000

2,636,000

Corporate separation payment (4)

(D)

-

-

3,000

358,000

Adjusted EBITDA

$

4,592,000

$

4,304,000

$

13,292,000

$

12,338,000

Adjusted EBITDA margin

27.7

%

28.1

%

27.2

%

27.7

%

(1) Stock-based compensation charges are included as follows:

Cost of revenues

$

78,000

$

55,000

$

226,000

$

171,000

Research and development

98,000

63,000

276,000

215,000

Selling and marketing

234,000

156,000

670,000

460,000

General and administrative

334,000

177,000

851,000

687,000

$

744,000

$

451,000

$

2,023,000

$

1,533,000

(2) Strategic consulting and litigation costs are included as
follows:

Cost of revenues

1,000

-

3,000

-

Research and development

52,000

-

55,000

-

Selling and marketing

1,000

-

2,000

-

General and administrative

90,000

664,000

760,000

2,636,000

$

144,000

$

664,000

$

820,000

$

2,636,000

(3) Intangible Amortization is included as follows:

Cost of revenues

50,000

-

100,000

-

Selling and marketing

57,000

-

113,000

-

$

107,000

$

-

$

213,000

$

-

(4) Corporate separation payment is included as follows:

General and administrative

-

-

3,000

358,000

$

-

$

-

$

3,000

$

358,000

This presentation includes Non-GAAP measures. Our Non-GAAP measures are
not meant to be considered in isolation or as a substitute for
comparable GAAP measures and should be read only in conjunction with our
consolidated financial statements prepared in accordance with GAAP. For
a detailed explanation of the adjustments made to comparable GAAP
measures, the reasons why management uses these measures, the usefulness
of these measures and the material limitations of these measures, see
Notes to Reconciliation of GAAP to Non-GAAP Financial Measures on the
next page.

ZIX CORPORATION

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES OUTLOOK

LOW

HIGH

LOW

HIGH

Three Months Ended

Three Months Ended

Twelve Months Ended

Twelve Months Ended

December 31

December 31

December 31,

December 31,

2017

2017

2017

2017

Revenue:

GAAP revenue

$

16,600,000

$

16,800,000

$

65,500,000

$

65,700,000

Diluted net income per common share:

GAAP net income

$

0.02

$

0.03

$

0.10

$

0.11

Stock-based compensation charges

$

0.01

$

0.01

$

0.05

$

0.05

Strategic consulting and litigation costs

$

-

$

-

$

0.02

$

0.02

Intangible Amortization

$

0.00

$

0.00

$

0.01

$

0.01

Corporate separation payment

$

0.02

$

0.02

$

0.02

$

0.02

Income tax impact

$

0.03

$

0.02

$

0.08

$

0.07

Non-GAAP adjusted net income

$

0.08

$

0.08

$

0.28

$

0.28

Shares used to compute Non-GAAP adjusted net income per share -
diluted

54,450,000

54,450,000

54,399,631

54,399,631

This presentation includes Non-GAAP measures. Our Non-GAAP measures are
not meant to be considered in isolation or as a substitute for
comparable GAAP measures and should be read only in conjunction with our
consolidated financial statements prepared in accordance with GAAP. For
a detailed explanation of the adjustments made to comparable GAAP
measures, the reasons why management uses these measures, the usefulness
of these measures and the material limitations of these measures, see
Notes to Reconciliation of GAAP to Non-GAAP Financial Measures on the
next page.

ZIX CORPORATIONNOTES TO RECONCILIATION OF GAAP TO
NON-GAAP FINANCIAL MEASURES

USE OF NON-GAAP FINANCIAL INFORMATION

The Company occasionally utilizes financial measures and terms not
calculated in accordance with generally accepted accounting principles
in the United States (“GAAP”) in order to provide investors with an
alternative method for assessing our operating results in a manner that
enables investors to more thoroughly evaluate our current performance as
compared to past performance. We also believe these Non-GAAP measures
provide investors with a more informed baseline for modeling the
Company’s future financial performance. Management uses these Non-GAAP
financial measures to make operational and investment decisions, to
evaluate the Company's performance, to forecast and to determine
compensation. Further, management utilizes these performance measures
for purposes of comparison with its business plan and individual
operating budgets and allocation of resources. We believe that our
investors should have access to, and that we are obligated to provide,
the same set of tools that we use in analyzing our results. These
Non-GAAP measures should be considered in addition to results prepared
in accordance with GAAP, but should not be considered a substitute for
or superior to GAAP results. We have provided definitions below for
certain Non-GAAP financial measures, together with an explanation of why
management uses these measures and why management believes that these
Non-GAAP financial measures are useful to investors. In addition, in our
earnings release we have provided tables to reconcile the Non-GAAP
financial measures utilized to GAAP financial measures.

Items (A) through (F) on the "Reconciliation of GAAP to Non-GAAP
Financial Measures" table are listed to the right of certain categories
under "Gross profit," "Operating income," "Net income," "Net income per
share - diluted" and "EBITDA" and correspond to the categories explained
in further detail below under (A) through (F).

(A) Non-cash stock-based compensation charges relating to stock option
grants, restricted stock, and restricted stock units awarded to and
accounted for in accordance with Share-Based Payment accounting
guidance. See (1) on previous page for breakdown of stock-based
compensation. Because of varying valuation methodologies, subjective
assumptions and varying award types, the Company believes that the
exclusion of stock-based compensation charges provides for more accurate
comparisons to our peer companies and for a more accurate comparison of
our financial results to previous periods. Additionally, the Company
believes it is useful to investors to understand the specific impact of
non-cash stock-based compensation charges on our operating results.

(E) The Non-GAAP adjustment to the tax provision represents the non-cash
tax expense included in the GAAP tax provision, including the current
period utilization of deferred tax assets created in previous periods.
The remaining provision for income taxes represents expected cash taxes
to be paid.